TaxTMI 
TaxTMI 
2018 (7) TMI 1684
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.... of appeal for both the assessment years. For the sake of brevity, the grounds of appeal for A.Y. 2012-13 are extracted below: GROUND I 1. The Hon'ble Commissioner of Income Tax (Appeals) - 8 ('CIT(A)') erred in confirming the action of the Deputy Commissioner of Incometax, Circle 3(2)(2), Mumbai ("DCIT") in disallowing the revenue expenses amounting to Rs. 37,22,5637- incurred towards realisation of Non- Performing Assets ('NPA') on the ground that the same be treated as 'work-in-progress' with each NPA and can be claimed only when such NPAs are finally settled. 2. He failed to appreciate the fact and ought to have held that the expenses were of 'revenue' nature and were expended wholly or exclusively for the purpose of the business of the Appellant and that actual earning of income there from was not relevant. 3. The Appellant therefore prays that the DCIT be directed to delete the aforesaid disallowance." 3. The brief facts of the case are that the assessee is engaged in the business of acquiring "Non-performing loans" from Banks and financial institutions and resolving them. The assessee has filed return....
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....ress account. He noted that as asset was not sold or transferred during the year, the expenses transferred to work-in-progress account cannot be allowed as deduction while computing income from business and, accordingly, disallowed Rs. 37,22,563/- and added it to the total income of the assessee. 4. Aggrieved, the assessee carried the matter in appeal before the first appellate authority. Before the CIT(A), the assessee has filed elaborate written submissions vide its letter dated 10.10.2016, which has been reproduced by the CIT(A) at para 4.1 at pages 6 to 20. The assessee also relied upon various case laws to justify treatment of its expenses in books of account as part of particular asset and treatment of said expenses as revenue in statement of total income. The learned CIT(A) after considering relevant submissions of the assessee and also by following the decision of ITAT Mumbai Bench, vide its order dated 30.10.2015, in assessee's own case for A.Ys. 2009-10 and 2010-11 in ITA Nos. 3123 & 6331/Mum/2013 confirmed the additions made by the Assessing Officer towards disallowance of expenses incurred on Non Performing Assets and capitalized in books of account, but claimed as r....
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.... Is transferred to NPA A/c. and only at the end, net profit or loss is transferred to the Profit & Loss Account. Therefore the expenditure incurred during the recovery process relates to the recoveries which are to be accounted for in the NPA account either in this year or in future whenever the recoveries are made. Therefore, as per matching principle of accountancy they are not matching with the revenue realized before the NPA is settled. Such expenditure should be treated as work-in-progress with each NPA and transferred to Profit & Loss Account only when the NPA is finally settled. Accordingly CIT(A) was justified in rejecting the claim of the assessee on this account. This reasoned findings of the CIT(A) need no interference from our side because such expenses should be treated as work-in-progress with each NPA and transferred to Profit & Loss Account only when the NPA is finally settled. Accordingly the appeal filed by the assessee is dismissed." 5.1.3 Since the facts and circumstances relating to this issue have remained unchanged for the instant assessment year, respectfully following the decision of Hon'ble Mumbai ITAT cited above, the disallowance of Rs. 37,2....
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....ry and maintaining of such NPAs to Profit & Loss Account as revenue expenditure. Assessee has practical difficulties in valuing such NPAs because it is not certain as to how much will be the realization and when. It may be difficult to even partially realize the revenue or determine the profit. Therefore the assessee is not crediting Profit & Loss Account with recovery as and when made whereas that is transferred to NPA A/c. and only at the end, net profit or loss is transferred to the Profit & Loss Account. Therefore the expenditure incurred during the recovery process relates to the recoveries which are to be accounted for in the NPA account either in this year or in future whenever the recoveries are made. Therefore, as per matching principle of accountancy they are not matching with the revenue realized before the NPA is settled. Such expenditure should be treated as work-inprogress with each NPA and transferred to Profit & Loss Account only when the NPA is finally settled. Accordingly CIT(A) was justified in rejecting the claim of the assessee on this account. This reasoned findings of the CIT(A) need no interference from our side because such expenses should be treated as wor....
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....e Court in the case of MAKData Pvt. Ltd. v/s. CIT (2013), 358 ITR 593 (SC) and Hon'ble Delhi High Court in the case of Zoom Communications Pvt. Ltd. 40 DTR 249 (2010). 3. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored." 10. The brief facts of the case are that, in this case the assessment was compled u/s. 143(3) on 24.12.2012 determining total income at Rs. 4,14,23,101/- by making additions towards disallowance of expenses incurred on loan assets and added as carrying cost to loan assets but claimed as revenue expenses in statement of total income for Rs. 93,46,138/-. Thereafter, the Assessing Officer initiated penalty proceedings u/s. 271(1)(c) for furnishing inaccurate particulars of income and, hence, called upon the assessee as to why penalty should not be levied u/s. 271(1)(c) of the Act. In response to notice, the assessee vide letter dated 06.12.2015, submitted that it has preferred appeal against order of the Assessing Officer before the ITAT and the appeal filed by it is pending for adjudication, therefore, till such appeal is disposed of by the ITAT, penalty proceedings may b....
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....reme Court in the case of Reliance Petro Products (supra), as also the decision of Hon'ble Bombay High Court in the case of CIT vs. Aditya Birla Novo Ltd. (Income Tax Appeal No. 3899 of 2010) observed that the tenets for determining the concealment or furnishing of inaccurate particulars of income have been laid down in the above judgments, as per which the facts of the assessee's case are covered by the principles laid down by the apex court in the case of Reliance Petro Products. Hence, the Assessing Officer erred in levying penalty in respect of disallowance of expenses for alleged furnishing of inaccurate particulars of income. Accordingly, he directed the Assessing Officer to delete the penalty levied u/s. 271(1)(c) of the Act. The relevant portion of the order of CIT(A) is extracted below: 5.2.1 These ground pertains to levy of penalty of u/s 271 (1 )(c) of the Act. l have gone through the facts of the case, assessment order, penalty order and the contentions of the appellant. 5.1.2 In the instant case I find that the issue on which the additionshad been made by the A.O. in his order under section 143(3) of the Act, formed part of the appellant's account....
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....rticulars of income. 'Inaccurate' is something factually incorrect and interpretation of law can never be a factual aspect. Just because the A.O. does not accept an interpretation, such an interpretation is not rendered incorrect. 5.2.5 Coming to a decision in this case, I find support in the following decision of Hon'ble Supreme Court: * The Hon'ble Apex Court in the case of CIT vs. Reliance Petroproducts (P.) Ltd. (322 ITR 158) ,it is held that the disallowance made by the Assessing Authority in the assessment order under section 143(3) of the Act were solely on account of different views taken on the same set of facts and, therefore, they could, at the most, be termed as difference of opinion but nothing to do with the concealment of income or furnishing of inaccurate particulars of such income. (i.) Even if the Appellant makes a purported wrong claim in ROI but the same is disclosed in ROI, penalty is not leviable. Such view has been taken by the Hon'ble Bombay High Court, being the jurisdictional High Court in the Appellant's case, inthe case of CIT vs. Nalin P. Shah (HUF) (40 taxmann.com 86). In that case, the respondent-Appe....
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....edemption. The Hon'ble Bombay High Court, followed the ratio laid down in the decision of Reliance Petroproducts (supra) and held that since the Appellant had given all the details and its claim was based on bona fide belief, penalty under section 271(1)(c) of the Act was not leviable. > Similarly the Hon'ble Bombay High Court in the case of CIT vs. M/s. Aditya Birla Nova Limited (ITA No. 3899 of 2010) that the assessee had furnished all the details of its expenditure as well as income in its ROI, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. The Hon'ble Bombay High Court further held that merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract penalty under section 271(1)(c) of the Act. The Hon'ble Bombay High Court also rejected the Department's argument that the decision in case of Reliance Petroproducts (supra) was per incurim because it did not refer to Explanation 1 to section 271(1)(c) of the Act. Thi....
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....o furnishing of inaccurate particulars of income. 15. We have heard both the parties and perused the material available on record. The Assessing Officer levied penalty u/s. 271(1)(c) in respect of additions made on account of disallowance of expenses incurred on NPA and treated as part of cost of assets in books of account but claimed as revenue in nature in the statement of total income. The Assessing Officer levied penalty u/s. 271(1)(c) for furnishing of inaccurate particulars of income. According to the Assessing Officer, the assessee has deliberately furnished inaccurate particulars of income so as to evade payment of taxes in respect of expenses. It is a contention of the assessee that it has furnished complete details of expenses in its financial statements by way of notes to account explaining the reasons of treating expenses as cost of assets and treatment of such expenses as revenue in nature in statement of total income. The assessee also explained reasons for treating such expenses as cost of assets. According to the assessee, the Assessing Officer never disputed the fact that these expenses are revenue in nature, but he has also not disputed the fact that these expe....